Development Issues within the world Trade vs. Aid

Questions you should be able to answer at the end of this section: With reference to one or more case studies, discuss the role that aid can play in the development of the economies of poor countries(10 marks) Discuss the roles of both trade and aid in development issues(10 marks)

Trade vs. Aid in helping the poorer countries of the world to develop Since the 1940’s, there have been 2 main ways to promote development in the poorer countries of the world: 1.The use of trade to encourage economic growth 2.Developed countries (and now also oil rich countries) provide aid to the poorer countries Both methods have their advantages and disadvantages.

What is trade? Trade happens because of regional economic differences. In order to balance production and consumption, raw materials, goods and services are moved from regions of supply to regions of demand. There is a strong relationship between the volume of trade and standard of living, and trade is an important factor of development.

Trade and development It is difficult to achieve economic development without economic growth. Growth  increase in wealth  improved living standards (and eventually higher HDI). In the 1940’s therefore, economists in MEDC’s believed poor countries needed to industrialise  increase in manufactured goods for export, rather than relying on exporting raw materials (cheaper, unreliable market, agricultural products are volatile)  increased economic growth and in turn, development.

How was this going to be achieved? 1.Poor countries should take on Western- style capitalism (potentially good for political situation too, as democracy is seen to be fairer) 2.The wealth that was generated would ‘trickle down’: money  resources for industry  more goods being produced  more trade  even more economic growth 3.Poor countries should promote neoliberal ideologies – the ideas of free trade, economic growth and efficiency, and open markets, that Thatcher and Reagan promoted in the 1980’s.

What was their big assumption?? That the poorer countries in the South needed to develop in the same way that the richer countries of the North had done since the mid C19 th, in order to achieve economic growth.

Task Using p.219, complete the ‘trade’ section of your table – what are the advantages and disadvantages of promoting growth through trade in poorer countries?